NJ: Mandatory Legal Malpractice Insurance: The Time Has Come.

In order to drive a car in New Jersey, you need a license and insurance. If your negligent driving injures someone, you have insurance not only to protect yourself, but to protect the person you injure.

In order to practice law in New Jersey, you also need a license, but not insurance. If your negligence dmages a client and you have no insurance, then it’s too bad for the client.

Is there something wrong with this picture? We think so. We lawyers are fiduciaries to our clients. That means that first and foremost we have to put our clients’ interests ahead of our own. Even at our own cost.

Is New Jersey destined for universal mandatory legal malpractice insurance?

I always think it is a good rule to mandate that someone in a position of holding someone’s livelihood be held in a position where if they ruin that if they ruin that livelihood, they are in a position to monetarily fix it. If someone is judgment proof and faces no penalty for their actions, it just sends a memo to everyone else that insurance means nothing.

Cheryl Neuman

I dont think that a car driver and a lawyer are directly comparable. Any person driving a car has the potential to be hurt or to hurt someone else as a result of driving the car. Every time a person comes out of a car alive is a complete miracle. I think it would be fair to say that driving a car can be a matter of life and death. Lawyers, however, do not operate a piece of heavy machinery every time they practice law. Lawyers may make mistakes, such as filing a motion untimely or filing the wrong motion, but the client will not die as a result of this error. So in this way, I think that car drivers and lawyers are different, and while it is a good idea for lawyers to have insurance, I do not think it should be required.

Ben Wasserman

Cheryl:
What about the overwhelming majority of car cases that inflict financial damage on the victim? Isn’t that really the analogy to focus on when it comes to comparing car drivers and lawyers? If so, then why shouldn’t lawyers have insurance to compensate the victims of their mistakes? Moreover, unlike car drivers, lawyers are fiduciaries to their clients, and as we learned in class this semester, the essence of the fiduciary duty is to put the client’s interest ahead of the lawyer’s. When a lawyer has malpractice insurance isn’t that protecting the client first and foremost, even from the lawyer’s own mistakes? It seems to me that having malpractice insurance to protect our clients is the quintessential manifestation of putting our clients’ interests ahead of our own. Thus, can’t it reasonably be concluded that to fulfill one’s fiduciary duty to the client, a lawyer must have legal malpractice insurance to protect the client? Tell me why I am wrong.

Cheryl Neuman

I do not think you are wrong. Your reasoning is sound and very convincing, but I do have an argument that leans in the other direction. Suppose for example that A sues B in tort. Under the principles of law, if B is indeed guilty of the tort and is responsible to A for monetary damages, then A should be able to recover those damages from B. But what if, however, B is bankrupt and has no assets, thereby rendering him judgment proof? Under this analysis, A is left without any recourse and cannot recover any damages. Should we require that every person who “might” be sued, maintain a balance of “x” amount of money in his bank account, so that in the event that he is sued, the person suing may recover monetary damages? I don’t think so.
Now, I am aware that lawyers have a fiduciary relationship with clients and they owe their clients a duty, but imposing mandatory insurance requirements on lawyers for potential monetary damages seems unjust to me. Unlike doctors, who are in a position to affect a client’s life/death, lawyers may negatively affect their clients in a monetary sense, but that does not justify imposing insurance on lawyers.

Ben Wasserman

Let me see if I understand your argument.

It’s OK to make driving students pay for driver’s ed courses.
It’s OK to make law students to pay for law school.
It’s OK to make drivers pay for fees to get a driver’s license
It’s OK to make lawyers pay for fees to get a law license.
It’s OK to make drivers pay for liability insurance as part of the “financial responsibility laws”.
But it’s not OK to make lawyers pay liability insurance to protect the people they are required to protect.
By the way, banks, trust companies, brokers and other fiduciaries are required to have liability insurance.
Why not lawyers?
Prof. W.

Ryan O’Donnell

I agree that lawyers should be required to carry some sort of liability insurance, but does that not open the door for most professions and businesses to be required to carry liability insurance? The cost may be feasible for some businesses to carry, but in many cases it may force an employer to let go of some of its employees to free up some money just to make insurance payments.
That being said, lawyers do have a fiduciary duty to their clients, and as such should be required to carry insurance.

Cheryl Neuman

When the question is phrased in light of all the other professions that require liability insurance, my argument must fail.
At first glance, I thought that the imposition was unjustified, but now that I am aware that banks, trust companies, brokers and other fiduciaries are required to have liability insurance, then lawyers DEFINITELY must also have liability insurance to protect their clients.